Supreme Court upholds healthcare reform

The individual mandate--which requires virtually everyone in the United States to buy health insurance or pay a penalty on their tax returns--is constitutional, the U.S. Supreme Court ruled today.

In its decision, released shortly after 10 a.m. EDT, the Court said that the individual mandate is within Congress' constitutional authority to levy taxes.

The decision was five to four, with Justices Sonia Sotomayor, Stephen Breyer, Ruth Bader Ginsburg and Elena Kagan voting with the majority that the Act is constitutional; Chief Justice John Roberts' fifth vote tipped the decision in favor of the Obama administration.

Dissenting were Justices Anthony Kennedy, Samuel Alito, Antonin Scalia and Clarence Thomas. "The federal government does not have the power to order people to buy health insurance," they wrote in the dissenting opinion.

The Court said that the penalty for those who do not have health insurance is indeed a tax but said it does not fall under the Anti-Injunction Act, an 1867 federal law that says in order to file a lawsuit to challenge a government tax, you must first pay it, request a refund and only later file a lawsuit to challenge the tax. The tax takes effect in 2014.

The Court would not have ruled either way if the tax fell under the Anti-Injunction Act.

Today's decision will have a tremendous impact on the healthcare industry and the patients they serve.

"This is a victory for the American people--that's my gut reaction," Kenneth Davis, M.D., president and CEO of Mt. Sinai Medical Center in New York City told FierceHealthcare in a phone interview immediately following the ruling. "Healthcare in this country should be a right, not a privilege. And the Supreme Court upholding this law goes far toward making that a reality."

Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional. The exception: a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. The Court limited the federal government's ability to penalize states by withholding Medicaid funds. The provision is constitutional, they ruled, as long as states would only lose new funds if they didn't comply with the new requirements, rather than all of their funding.

Davis said that in "generous" states, such as New York, that's good news, but he added that it will hurt healthcare organizations and their patients in states that buck the federal government by eschewing healthcare reform.

Now that the Court has upheld the Affordable Care Act, the expected influx of newly insured patients will lower bad-debt charges at for-profit hospitals and, the theory goes, fewer patients will use costly emergency services instead seeing a primary care physician for preventative care.

"Having 35 million more people insured will in some way moderate the effects of all those people coming to the emergency room who previously had no insurance. Now, at least, there will be some payment for the care they receive," Davis said.

"People delay care because they can't afford it. They wind up coming to hospitals when they have very serious disease and that costs the healthcare system much more money than it otherwise would. People who are insured are able to get the care that they need early on in the course of their illness. Having more people ensured and having more primary physicians to take care of them will facilitate decreased costs in healthcare [which is something] we're all working on," he said.

The popular media and the public have in many ways oversimplified--and overestimated--the Supreme Court's impact on healthcare reform. In fact, no matter what had happened today, the leaders in the insurance industry and at hospitals, accountable care organizations and other healthcare organizations have said they would push forward with some form of reform regardless of today's ruling.

"The underlying currents that have driven that legislation will still be there: the need for coverage, the need to deal with costs, the need to make the healthcare system more effective," UnitedHealth CEO Stephen Hemsley said recently.

On the accountable care front, efforts to prevent readmissions, encourage provider-patient communication and preventative care would have gone forward. "It's virtually irrelevant for us as a provider organization," president and CEO Richard Hachten of Alegent Health, an Omaha, Neb.-based system, said ahead of the ruling.

The current healthcare system is "absolutely unsustainable," added John Fraser, CEO of Methodist Health System in Omaha.

Here's a breakdown of the cases:

In Florida v. Department of Health & Human Services, a coalition of states, led by Florida, asked the court to rule on whether Congress can withhold Medicaid funding from states that don't comply with provisions of the ACA. The court said, with some limitations, withholding funds is allowed.

In the Department of Health & Human Services v. Florida, the question was whether Congress has the power under the Constitution to require virtually all Americans to obtain health insurance or pay a penalty and whether the Anti-Injunction Act, which prohibits taxpayers from filing a lawsuit to challenge a tax until the tax goes into effect and they are required to pay it, prohibits a challenge to the Act's provision requiring virtually all Americans to obtain health insurance or pay a penalty until after the provision goes into effect in 2014.

The Court said Congress may require people to buy health insurance and that, although the penalty is a tax, the Anti-Injunction Act does not apply.

In the National Federation of Independent Business v. Sebelius, the main issue at hand was severability: whether the rest of the Act can remain in effect or must also be invalidated if the Court ruled the individual mandate unconstitutional. The Court did not rule on this question; it was rendered moot by their decision that the individual mandate is constitutional.